Most Read

In its last update, Alibaba Group announced that the company was preparing for its primary listing in Hong Kong and the process was expected to complete by the end August.
The Board meets on 14 August to approve results for the three months ending June. Could there be an announcement on the dual primary listing too?
Mainland Chinese own between 3.5%-15.5% of companies that converted from Secondary to Dual-Primary in the last few years. Similar buying in Alibaba could take the stock higher from here.

HSCEI/HSTECH/HSIII Index Rebalance Preview: Potential Changes, Flow & Positioning

The constituent changes for the Hang Seng China Enterprises Index (HSCEI INDEX), Hang Seng TECH Index (HSTECH INDEX) and HSIII Index will be announced after market close on Friday.
We forecast 2 changes for the Hang Seng China Enterprises Index (HSCEI INDEX), 1 change for the Hang Seng TECH Index (HSTECH INDEX) and 3 changes for the HSIII Index.
With same-way and opposing flow on stocks from different passive trackers, the one-way trade is currently estimated at HK$5.2bn (US$672m). That will change with final capping done on 3 September.

To Tender Or Not – Gauging The Future of Sun Corp (6736)

The revised/final True Wind Tender Offer for up to 19% of Sun Corp (6736 JP) ends this week. With the “excitement” the last two weeks, the SunCorp/CLBT ratio is higher.
The minimum threshold is relatively low. The Tender will most likely succeed with very high pro-ration.
For those on the edge, I discuss possibilities on the back end. It will be less liquid, but that may not be bad.

TCM (570 HK): A Spoonful Of Sugar …

A 14.8% gain month-to-date, including this past Monday’s 6.5% pop – you just knew something positive was taking place behind closed doors. And leaking its way into the public.
So it was no real surprise to read in the latest monthly update announcement on the HKEx that various regulatory approvals are almost, but not quite, satisfied.
The wording in the announcement strikes a positive tone. Even remaining conservative on the timeline, this could be wrapped up before year-end.

China Traditional Chinese Medicine (570 HK): Relief as Update Favours the Bulls

China Traditional Chinese Medicine (570 HK)’s monthly update reinforces the bull case. The gross spread has remained uncomfortably high since falling on no news on 26 June.
The monthly update will relieve the bulls, as the consortium has finally made the regulatory submissions. The update stresses that the filing delay is due to an unwieldy consortium.
Potential stumbling blocks remain, which should not be an issue. Nevertheless, the risk (17.7% downside to the undisturbed price)/reward (21.4% gross spread) remains attractive.

Midea Group (000333 CH): Index Implications at US$3bn Issue Size

Midea Group Co Ltd A (000333 CH) has got approval to list on the HKEX (388 HK) and reports are that the listing could be up to US$3bn.
That issue size is around half of the maximum that the company can issue. But it would still need cornerstone investors and a nice discount on the H-shares.
The stock will still get included in some indices even with the scaled down size, and inclusion in Southbound Stock Connect is a given.

Sun Corp (6736) – The Future Is Bright

The reason why Sun Corp (6736 JP) has traditionally traded at a large discount to its potential outcome is the possibility of inefficient or delayed value realisation.
Materially ALL of the value of the company is in its holding in Cellebrite DI (CLBT US). True Wind Capital, the SPAC sponsor of CLBT, just bought 19% of SunCorp.
They bought that for the CLBT, or the value realisation thereof. And now with the slightly surprising Tender Offer result, the chances of a better outcome are now higher.

Value-Up Flow Trading Opportunities Arising from NPS’s 10% Ownership Ceiling on Banks

NPS is concerned that aggressive value-up measures by bank holding companies and ongoing cancellations might quickly use up their room up to the 10% ownership limit.
With their stake already at mid-8%, they may not buy as much as the index suggests, creating new trading opportunities in the four major bank holding companies.
Woori Financial has more room for buying, so as the year ends, NPS’s skewed-buying could give it a better price impact than other bank holding companies.

JD.com (JD US): Strong Profitability And Upsized Share Buyback in 2Q24

By Steve Zhou, CFA

Profitability of the business surprised on the upside, as the net profit margin of JD.com increased from 3% in 2Q23 to 5% in 2Q24.
Share buyback accelerated in 2Q24, as the company bought USD2.1bn worth of stock in the quarter, up from USD1.2bn in 1Q24.
The stock is trading at 7x 2024 PE, with a yield of >10% through dividend and buyback.

Merger Between Celltrion Inc and Celltrion Pharm Is Cancelled

Celltrion Inc announced that its proposed merger with Celltrion Pharm has been cancelled due to disapproval of this deal among an overwhelming percentage of Celltrion Inc shareholders.
This cancellation of a merger between Celltrion Inc and Celltrion Pharm is likely to continue to have a positive impact on Celltrion Inc and negative impact on Celltrion Pharm.
The major reason is because Celltrion Pharm trades at high valuation multiples while Celltrion Inc trades at lower valuation multiples. Celltrion Pharm’s P/B valuation is more than 3x Celltrion Inc’s.

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Aug 16

Most Read: Alibaba Group Holding , JTower, China Traditional Chinese Medicine, Midea Group Co Ltd A, Asahi Intecc, Kangwon Land and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TCM (570 HK): Where’s The Floor?
Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
China TCM (570.HK) Privatization Update – Things Are Still Manageable
J Tower (4485) – Once Ambitious, Still High Growth, Sells Itself Low/Cheapish.
China Traditional Chinese Medicine (570 HK): Relief as Update Favours the Bulls
Midea A/H Listing – Getting Closer to the US$3bn+ Raising, Has a Narrow Window
Long 7747 Asahi Intec | Short 7733 Olympus
Examining the September Reshuffle of the KOSPI Size Index Series
TCM (570 HK): A Spoonful Of Sugar …
Midea Group (000333 CH): Index Implications at US$3bn Issue Size

TCM (570 HK): Where’s The Floor?

Just plain ugly. China Traditional Chinese Medicine (570 HK) (“TCM”) fell 11.7% yesterday. It’s down another 7.9%, on large volume, as I type. The stock is now ~35% below terms
Depending on who you talk to, the sudden move was triggered by a couple of event pods dumping stock; or the incoming CNPGC chairman is not supportive. Or perhaps both.
Since rumours surfaced early Feb as to an Offer, a basket of TCM’s peers are up 8% on average. The HSI is up 15%. TCM’s downside from here appears limited.

Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?

In its last update, Alibaba Group announced that the company was preparing for its primary listing in Hong Kong and the process was expected to complete by the end August.
The Board meets on 14 August to approve results for the three months ending June. Could there be an announcement on the dual primary listing too?
Mainland Chinese own between 3.5%-15.5% of companies that converted from Secondary to Dual-Primary in the last few years. Similar buying in Alibaba could take the stock higher from here.

China TCM (570.HK) Privatization Update – Things Are Still Manageable

What disappoints investors is that privatization progress is slower-than-expected. Since approval is in “advanced stage”, August update is eye-catching. Investors may need more patience with this type of SOE deal.
The key to the success of this privatization lies in whether CNPGC is willing to abide by its commitments. If yes, CNPGC will take all measures to solve the problems.
According to our valuation calculation, even without this privatization, HK$3.5/share is fair for China TCM. Reasonable share price is above HK$5/share. Don’t forget, the privatization is still on the agenda.

J Tower (4485) – Once Ambitious, Still High Growth, Sells Itself Low/Cheapish.

JTower (4485 JP) IPOed itself Dec-2019 at ¥1,600/share. An 8-bagger in a year, fell by half, doubled, fell 70%, then doubled, fell 35%, up 50%. That’s the first 3yrs.
Since then, the trend has been lower. The stock is down 80+% in 2 years, especially painful after an equity raise at just under ¥5,000 6 months ago.
But the stock today closed at ¥1,430, and the Tender Offer is at ¥3,600. A 150% premium. That’s big, but it may be “too low.” An interesting case.

China Traditional Chinese Medicine (570 HK): Relief as Update Favours the Bulls

China Traditional Chinese Medicine (570 HK)’s monthly update reinforces the bull case. The gross spread has remained uncomfortably high since falling on no news on 26 June.
The monthly update will relieve the bulls, as the consortium has finally made the regulatory submissions. The update stresses that the filing delay is due to an unwieldy consortium.
Potential stumbling blocks remain, which should not be an issue. Nevertheless, the risk (17.7% downside to the undisturbed price)/reward (21.4% gross spread) remains attractive.

Midea A/H Listing – Getting Closer to the US$3bn+ Raising, Has a Narrow Window

By Sumeet Singh

Midea Group Co Ltd A (000333 CH) one of the world’s largest home appliance producers, aims to raise up to US$3bn in its H-share listing.
Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
We have covered the company and deal background in our previous notes. In this note, we talk about the updates since then.

Long 7747 Asahi Intec | Short 7733 Olympus

By Andrew Jackson

7747 Asahi Intec announced FY06/25 OP guidance of Y25.2bn, close to street expectations, pointing to substantial upside. GPM guidance has increased and continuation of strong 4Q YoY sales is expected.
Seven days of short interest outstanding could lead to a short squeeze; Earnings briefing tomorrow reinforcing these trends should be a further catalyst for upside.
With short interest now low and limited potential for further gains after the recent rebound, 7733 Olympus appears to be losing momentum, especially with China sales continuing to flag.

Examining the September Reshuffle of the KOSPI Size Index Series

The September KOSPI Size Index rebalancing could bring back the typical price impacts seen over the past decade, unlike the March rebalancing.
The previous rebalancing had anomalies due to newly listed stocks in LARGE and a stronger downward trend in LARGE-to-MID transitions, disrupting the expected price impact.
For September’s rebalancing, fewer distortions are expected compared to March. The NPS Mid to Small Cap fund, a key influence, shows no significant changes in benchmark or AUM.

TCM (570 HK): A Spoonful Of Sugar …

A 14.8% gain month-to-date, including this past Monday’s 6.5% pop – you just knew something positive was taking place behind closed doors. And leaking its way into the public.
So it was no real surprise to read in the latest monthly update announcement on the HKEx that various regulatory approvals are almost, but not quite, satisfied.
The wording in the announcement strikes a positive tone. Even remaining conservative on the timeline, this could be wrapped up before year-end.

Midea Group (000333 CH): Index Implications at US$3bn Issue Size

Midea Group Co Ltd A (000333 CH) has got approval to list on the HKEX (388 HK) and reports are that the listing could be up to US$3bn.
That issue size is around half of the maximum that the company can issue. But it would still need cornerstone investors and a nice discount on the H-shares.
The stock will still get included in some indices even with the scaled down size, and inclusion in Southbound Stock Connect is a given.

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Aug 15

Most Read: ASM Pacific Technology, Sun Corp, Greatview Aseptic Packaging, Core Lithium Ltd, JTower, China Resources Beverage, Thanachart Capital, VanEck Vectors Junior Gold Miners ETF, Piolax Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSCEI/HSTECH/HSIII Index Rebalance Preview: Potential Changes, Flow & Positioning
To Tender Or Not – Gauging The Future of Sun Corp (6736)
Greatview Aseptic Packaging (468.HK) – The Story Behind The “Hostile Offer”
Tax-Loss Selling In Australia 2024: Trade Reversed Is Tale of Two Hedges, Time To Unwind
J Tower (4485) – Once Ambitious, Still High Growth, Sells Itself Low/Cheapish.
JTOWER (4485 JP): DigitalBridge’s 162% Takeover Premium Offer Is Opportunistic
China Resources Beverage Pre-IPO – Thoughts on Valuation
SET50 Index Rebalance Preview: Four Changes & A Few Close Names
Quiddity Leaderboard MV Jr Gold Miners Sep 24: Mergers Mean Possible Up-And-Out DELETEs
Piolax (5988 JP): Murakami Becomes a Substantial Shareholder

HSCEI/HSTECH/HSIII Index Rebalance Preview: Potential Changes, Flow & Positioning

The constituent changes for the Hang Seng China Enterprises Index (HSCEI INDEX), Hang Seng TECH Index (HSTECH INDEX) and HSIII Index will be announced after market close on Friday.
We forecast 2 changes for the Hang Seng China Enterprises Index (HSCEI INDEX), 1 change for the Hang Seng TECH Index (HSTECH INDEX) and 3 changes for the HSIII Index.
With same-way and opposing flow on stocks from different passive trackers, the one-way trade is currently estimated at HK$5.2bn (US$672m). That will change with final capping done on 3 September.

To Tender Or Not – Gauging The Future of Sun Corp (6736)

The revised/final True Wind Tender Offer for up to 19% of Sun Corp (6736 JP) ends this week. With the “excitement” the last two weeks, the SunCorp/CLBT ratio is higher.
The minimum threshold is relatively low. The Tender will most likely succeed with very high pro-ration.
For those on the edge, I discuss possibilities on the back end. It will be less liquid, but that may not be bad.

Greatview Aseptic Packaging (468.HK) – The Story Behind The “Hostile Offer”

The connection between Newjf and Greatview is deep. Newjf expressed an interest in acquiring Greatview early on, but the two parties didn’t reach an agreement. Greatview is not entirely “innocent”.
Newjf’s decision to forcibly acquire Greatview at this moment should be made after careful consideration. Mengniu may not necessarily oppose this merger. Mengniu is likely to take a neutral stance.
Newjf’s Offer is attractive. In the absence of a more realistic action by Greatview to make a higher Offer, we advise investors not to walk away from Newjf’s Offer easily.

Tax-Loss Selling In Australia 2024: Trade Reversed Is Tale of Two Hedges, Time To Unwind

The theory is that stocks which are down hard FY-to-date by end-April end up being good sells because Australians will harvest their losses into end-June.
The idea is then to buy those oversold names and hold them for 30-40 trading days. That has worked 10 out of the last 12 years hedged vs ASX200.
This year, the “sold-down” list is very heavily weighted to miners. They have continued to fall since end-June so it’s down. But hedged vs a basket of miners? It’s up.

J Tower (4485) – Once Ambitious, Still High Growth, Sells Itself Low/Cheapish.

JTower (4485 JP) IPOed itself Dec-2019 at ¥1,600/share. An 8-bagger in a year, fell by half, doubled, fell 70%, then doubled, fell 35%, up 50%. That’s the first 3yrs.
Since then, the trend has been lower. The stock is down 80+% in 2 years, especially painful after an equity raise at just under ¥5,000 6 months ago.
But the stock today closed at ¥1,430, and the Tender Offer is at ¥3,600. A 150% premium. That’s big, but it may be “too low.” An interesting case.

JTOWER (4485 JP): DigitalBridge’s 162% Takeover Premium Offer Is Opportunistic

JTower (4485 JP) has recommended a tender offer from DigitalBridge Group (DBRG US) at JPY3,600, a 161.8% premium to the undisturbed price of JPY1,375 (13 August).
Despite the hefty takeover premium, the offer is light (compared to historical trading ranges and the recent placement) and opportunistically timed (the share price has fallen 61% since 9 May).
Nevertheless, barring a spurt of activism, the offer should succeed as the required 40.7% minority acceptance rate is not onerous and should be comfortably met by Japanese cross-holders.

China Resources Beverage Pre-IPO – Thoughts on Valuation

By Sumeet Singh

China Resources Beverage is looking to raise US$1bn in its upcoming Hong Kong IPO.
China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
In our earlier notes, we talked about the company’s past performance and undertook a peer comparison. In this note, we will look at valuations.

SET50 Index Rebalance Preview: Four Changes & A Few Close Names

Couple of weeks from the start of the review period for the December rebalance of SET 50 Index, we see four potential index changes.
There are a few stocks that are close to the inclusion zone and there could be a reordering among the non-constituents as stock prices move around.
The potential adds have outperformed the potential deletes since the start of the year with most of the outperformance coming over the last 6 weeks.

Quiddity Leaderboard MV Jr Gold Miners Sep 24: Mergers Mean Possible Up-And-Out DELETEs

The MV J-Gold Miners index represents the performance small-cap gold and silver mining companies listed around the world.
This index is reviewed semi-annually in March and September. During these reviews, names can be added or deleted from the index.
In this insight, we take a look at the latest lists of potential ADDs and DELs for the index rebal event in September 2024.

Piolax (5988 JP): Murakami Becomes a Substantial Shareholder

Murakami’s entities, City Index Eleventh and City Index Third, reported a 5.05% position in Piolax Inc (5988 JP). The purchases were from 11 June to 6 August over 60 days.
Murakami’s average buy-in price over the last 60 days was JPY2,286.61 per share, a 0.7% discount to the last close price.
Murakami’s disclosure suggests two possibilities: the start of an activist campaign or a short-term pump-and-dump play. The former is likely as Piolax is cash-rich with a P/B less than 1x.

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Aug 14

Most Read: CPMC Holdings, Sun Corp, Giant Biogene, ASM Pacific Technology, Softbank Group, Greatview Aseptic Packaging, Orora Ltd, Tencent and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CPMC (906 HK) Responds To Champion’s Offer
To Tender Or Not – Gauging The Future of Sun Corp (6736)
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for September
HSCEI/HSTECH/HSIII Index Rebalance Preview: Potential Changes, Flow & Positioning
Softbank (9984 JP): The NAV Discount High Offers an Investment Opportunity
CPMC Holdings (906 HK): A Carefully Caveated Board Recommendation of Changping Industrial’s Offer
Greatview Aseptic Packaging (468.HK) – The Story Behind The “Hostile Offer”
Quiddity Leaderboard HSTECH Sep 24: Expected ADD and DEL Have 10+ Days to Trade
Orora Ltd (ORA AU) Rejects A$2.55/Share Offer From Lone Star
Tencent to Report 2Q FY24 Results (What Is Priced?), MSC Index Changes for Aug Rebalance Published

CPMC (906 HK) Responds To Champion’s Offer

On the 30th July 2024, packaging play CPMC Holdings (906 HK) dispatched the Composite Document for the HK$6.87/share, in cash, Offer from SASAC/NCSSF-backed Champion.
The Response Document, including the IFA opinion (with a fair & reasonable conclusion) has now been dispatched.
However, the focus remains on ORG Technology Co., Ltd. A (002701 CH)‘s superior HK$7.21/share Offer, which is currently negotiating the necessary regulatory approvals.

To Tender Or Not – Gauging The Future of Sun Corp (6736)

The revised/final True Wind Tender Offer for up to 19% of Sun Corp (6736 JP) ends this week. With the “excitement” the last two weeks, the SunCorp/CLBT ratio is higher.
The minimum threshold is relatively low. The Tender will most likely succeed with very high pro-ration.
For those on the edge, I discuss possibilities on the back end. It will be less liquid, but that may not be bad.

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for September

Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 September.
With no constituent changes in March and 1 add/1 delete in June, there could be more changes in September with Health Care stocks among the potential inclusions.
Changes to the Hang Seng Industry Classification System (HSICS) will be implemented from the September rebalance and that will alter industry coverage.

HSCEI/HSTECH/HSIII Index Rebalance Preview: Potential Changes, Flow & Positioning

The constituent changes for the Hang Seng China Enterprises Index (HSCEI INDEX), Hang Seng TECH Index (HSTECH INDEX) and HSIII Index will be announced after market close on Friday.
We forecast 2 changes for the Hang Seng China Enterprises Index (HSCEI INDEX), 1 change for the Hang Seng TECH Index (HSTECH INDEX) and 3 changes for the HSIII Index.
With same-way and opposing flow on stocks from different passive trackers, the one-way trade is currently estimated at HK$5.2bn (US$672m). That will change with final capping done on 3 September.

Softbank (9984 JP): The NAV Discount High Offers an Investment Opportunity

By Victor Galliano

The announcement of JPY500bn share buybacks is a positive for SoftBank group minority shareholders, and confirms the positive impact of the emergence of Elliott as an activist shareholder
The combination of the big weighting of Arm Holdings in the group’s equity value and the impact of the appreciating JPY has driven the NAV discount to very high levels
Much bad news seems priced in following the market turbulence; we remain positive on Softbank shares as they trade at a historically high 57%+ discount to the estimated NAV

CPMC Holdings (906 HK): A Carefully Caveated Board Recommendation of Changping Industrial’s Offer

The CPMC Holdings (906 HK) Board recommends that shareholders accept Changping Industrial’s HK$6.87 offer, which the IFA opines is fair and reasonable.
The Board’s carefully crafted and suitably caveated recommendation acknowledges that shares continue to trade through terms and ORG Technology Co., Ltd. A (002701 CH)’s HK$7.21 offer is higher but preconditional.
Based on ORG’s shareholding/irrevocable and volume traded above terms, Changping Industrial’s offer has little chance of success. It remains a question of when, not if, Changping Industrial will bump.

Greatview Aseptic Packaging (468.HK) – The Story Behind The “Hostile Offer”

The connection between Newjf and Greatview is deep. Newjf expressed an interest in acquiring Greatview early on, but the two parties didn’t reach an agreement. Greatview is not entirely “innocent”.
Newjf’s decision to forcibly acquire Greatview at this moment should be made after careful consideration. Mengniu may not necessarily oppose this merger. Mengniu is likely to take a neutral stance.
Newjf’s Offer is attractive. In the absence of a more realistic action by Greatview to make a higher Offer, we advise investors not to walk away from Newjf’s Offer easily.

Quiddity Leaderboard HSTECH Sep 24: Expected ADD and DEL Have 10+ Days to Trade

By Janaghan Jeyakumar, CFA

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
There could be one index change during the September 2024 index rebal event. The official results will be announced after market close on 16th August 2024.
In this insight, we take a look at our latest flow expectations based on closing prices on Monday 12th August 2024.

Orora Ltd (ORA AU) Rejects A$2.55/Share Offer From Lone Star

Sustainable packaging play Orora Ltd (ORA AU) has “received and has rejected an opportunistic, conditional and non-binding indicative proposal from Lone Star Fund“.
The A$2.55/share Offer (less any dividends declared or payable), by way of a Scheme, was a 33.9% premium to last close. Orora was down 25% YTD, prior to the proposal.
Orora’s FY24 results will be released tomorrow. Expect more commentary on the rejection of Lone Star’s approach in the Q&A.

Tencent to Report 2Q FY24 Results (What Is Priced?), MSC Index Changes for Aug Rebalance Published

By Charlotte van Tiddens, CFA

Last night, MSC published index changes due at the August rebalance. There will be no changes to SA constituents.
The rebalance is set to take place at the end of the month on Friday the 30th.
Tomorrow after the HK close, Tencent is expected to report results for 2Q FY24.

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Aug 13

Most Read: Kokusai Electric , Nikkei 225, Descente Ltd, Conocophillips, Trend Micro Inc, Hyundai Motor, Macquarie Korea Infra Fund, Ramsay Health Care, Giant Biogene and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Kokusai Electric (6525 JP): Placement Price Could Be Determined Today; Index Impact Could Be Delayed
How Has the Index Rebalance Strategy Performed During Market Turmoil?
Itochu (8001 JP) Launches Lowball TOB for Descente (8114) – Buying China on the Cheap
Select Sector Indices – HUGE Impact of Proposed Constituent Weighting Changes
Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?
Trend Micro (4704 JP): Evaluating the Privatisation Rumours
Flow Developments to Watch as the Release of the Value-Up Index Approaches
Macquarie Korea Infrastructure Fund: Rights Offering of About 500 Billion Won
Private Equity Examining Ramsay Health (RMC AU). Again.
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for September

Kokusai Electric (6525 JP): Placement Price Could Be Determined Today; Index Impact Could Be Delayed

Kokusai Electric (6525 JP) could price their secondary offering after market close today. The stock is down 10.5% since the rumors of the placement began 7 trading sessions ago.
The Philadelphia Stock Exchange Semiconductor Index (SOX INDEX) has been dropping over the last few days and is 8.6% lower over the last 8 trading days.
Kokusai Electric (6525 JP) has been trading higher on expectations of index inclusion in August, but that could move to November now.

How Has the Index Rebalance Strategy Performed During Market Turmoil?

The market turmoil over the last few trading sessions has not been kind to a simple index rebalance strategy of buying the forecast adds and selling the forecast deletes.
The overall returns and stock specific returns indicate that trades are more crowded in some indices as compared to others and traders should consider that when position sizing.
Anecdotally, periods of negative returns are followed by periods of strong returns for the strategy as weak hands are shaken out of their positions.

Itochu (8001 JP) Launches Lowball TOB for Descente (8114) – Buying China on the Cheap

Today, Itochu Corp (8001 JP) announced it would launch a Tender Offer when approvals were received, to buy out minorities in Descente Ltd (8114 JP) at ¥4,350/share.
Itochu was buying at that price or higher, in the market, in October 2023. Earnings and book are up since then. Outlook for the Descente China Holdings affiliate? Great.
The valuation transparency is disappointing. Activists would have 3mos or so to push for more. But with friendly holders, they get very close to the minimum anyway.

Select Sector Indices – HUGE Impact of Proposed Constituent Weighting Changes

S&P DJI have started a market consultation to change the index weighting methodology for the Select Sector Indices to reduce concentration and avoid reverse turnover.
There is US$281bn tracking the Select Sector Indices from the SPDR ETFs. The market consultation will have a larger impact on indices where there is a high degree of concentration.
The largest inflows are expected in Apple, Conocophillips, Amazon.com and Netflix while the largest outflows will be from Microsoft, NVIDIA, Chevron, Procter & Gamble, Exxon Mobil, Costco Wholesale and Meta Platforms.

Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?

A Reuters article overnight says Trend Micro might be up for sale. This caused the ADRs to jump 10% overnight. The remaining co-founders are 65 and 70 this year.
The stock has effectively gone sideways the last few years as Value Act has been activisting. Now one has to exercise one’s imagination to think about a possible sale price.
On a DCF basis, a PE fund couldn’t reasonably do this. Multiples are too high. That means a strategic buyer would be more likely. But Who? Why? And How much?

Trend Micro (4704 JP): Evaluating the Privatisation Rumours

Trend Micro Inc (4704 JP) shares rose 14.8% on Friday after Reuters reported that it is exploring a sale after attracting buyout interest.
The interest is unsurprising due to the weak share price. Since ValueAct disclosed a stake on 8 August 2022, the shares are down 0.7% vs the Nikkei 225’s 23.6% increase.
The lack of a controlling shareholder and increased cybersecurity M&A activity support the buyout interest. A privatisation price is likely to be around JPY9,000. Valuation is undemanding at last close.

Flow Developments to Watch as the Release of the Value-Up Index Approaches

The plan is to select 20 large-cap companies from around 30 with value-up disclosures by late August, then gradually expand the index’s constituents.
Investors seeking both dividends and value-up benefits must buy stocks individually, as ETFs lack tax advantages, potentially triggering fund shifts from dividend ETFs to value-up stocks.
We can target stocks in dividend ETFs not making value-up disclosures, as they may face overhang risk during fund migration to the value-up index.

Macquarie Korea Infrastructure Fund: Rights Offering of About 500 Billion Won

Macquarie Korea Infra Fund (088980 KS) announced that it is proceeding with a rights offering capital increase of 500 billion won, which represents about 9.4% of its current market cap.
MKIF plans to use higher liquidity increase in the following main areas: Seoul East Underground Expressway – 215 billion won Acquisition of Hanam Data Center – 423 billion won
In the next 6-12 months, we believe MKIF has a solid chance of outperforming KOSPI (on combined capital gains/dividends basis).

Private Equity Examining Ramsay Health (RMC AU). Again.

Back in April 2022, Australia’s largest private hospital operator Ramsay Health Care (RHC AU) announced an unsolicited, non-binding Offer from KKR at A$88.00/share. Arguably, KKR dodged a bullet.
RHC’s share price took another leg down last week after RHC announced weaker-than-expected FY24 earnings; plus a write-down of its European/UK ops. RHC is now ~50% adrift of KKR’s NBIO.
Not altogether surprisingly, various media sources are reporting private equity outfits are (again) running a diagnostic check on RHC.

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for September

Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 September.
With no constituent changes in March and 1 add/1 delete in June, there could be more changes in September with Health Care stocks among the potential inclusions.
Changes to the Hang Seng Industry Classification System (HSICS) will be implemented from the September rebalance and that will alter industry coverage.

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Aug 12

Most Read: Toyota Motor, Trend Micro Inc, SK Innovation, China Traditional Chinese Medicine, Taiwan Semiconductor (TSMC) – ADR, WeRide, Hyundai Motor, Korea Zinc, Swire Properties, Pharmaessentia Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Last Week in Event SPACE: Toyota, Swire, Fancl, Barito Complex, Descente
Trend Micro (4704 JP): Evaluating the Privatisation Rumours
SK Innovation: Considering on Using Its Treasury Shares to Inject Capital into SK On
Merger Arb Mondays (12 Aug) – China TCM, Canvest, GA Pack, Fuji Soft, Fancl, Descente, Takiron
Taiwan Dual-Listings Monitor: TSMC Strong Spread Rebound Into Short Zone; ASE Remains Broken Down
WeRide (WRD US) IPO: The Bull Case
Flow Developments to Watch as the Release of the Value-Up Index Approaches
Korea Zinc: Impressive Capital Return Plans and a Big Price Gap Between Korea Zinc and Young Poong
Swire Properties (1972 HK): Buyback to Offset Passive Selling
Taiwan Top 50 ETF Rebalance Preview: One Change Right at the Cusp

Last Week in Event SPACE: Toyota, Swire, Fancl, Barito Complex, Descente

The trade in Toyota Motor (7203 JP)‘s Tender offer Buyback is to understand what YOU can do in your particular position.
Despite Swire Properties (1972 HK)‘s recent share buyback, Swire Pacific (A) (19 HK) is still preferable on a look-through P/B of 0.34x.
Kirin bumps the Offer for Fancl (4921 JP). Given market gyration, it may represent enough of a switching opportunity to let those who still object in principle to re-allocate elsewhere.

Trend Micro (4704 JP): Evaluating the Privatisation Rumours

Trend Micro Inc (4704 JP) shares rose 14.8% on Friday after Reuters reported that it is exploring a sale after attracting buyout interest.
The interest is unsurprising due to the weak share price. Since ValueAct disclosed a stake on 8 August 2022, the shares are down 0.7% vs the Nikkei 225’s 23.6% increase.
The lack of a controlling shareholder and increased cybersecurity M&A activity support the buyout interest. A privatisation price is likely to be around JPY9,000. Valuation is undemanding at last close.

SK Innovation: Considering on Using Its Treasury Shares to Inject Capital into SK On

SK Innovation is considering on using its treasury shares to inject capital into its EV battery making subsidiary SK On.
The appraisal rights exercise price is 111,943 won per share (15% higher than current price). Many minority shareholders are likely to exercise their appraisal rights in SK Innovation.
We remain Bearish on SK Innovation. We continue to be negative on the SK Innovation and SK E&S merger. Plus, we are concerned about the continued weakness at SK On.

Merger Arb Mondays (12 Aug) – China TCM, Canvest, GA Pack, Fuji Soft, Fancl, Descente, Takiron

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Malaysia Airports Holdings (MAHB MK), Asia Cement China (743 HK).
Lowest spreads: Fuji Soft Inc (9749 JP), Second Chance Properties (SCE SP), Descente Ltd (8114 JP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP).

Taiwan Dual-Listings Monitor: TSMC Strong Spread Rebound Into Short Zone; ASE Remains Broken Down

By Vincent Fernando, CFA

TSMC: +16.1% Premium; Strong Spread Rebound, Potential Opportunity to Short the Spread
UMC: +1.6% Premium; Consider Shorting the Spread at This Level
ASE: +3.8% Premium; Uncertainty Remains on the Sustainability of the Recent Breakdown

WeRide (WRD US) IPO: The Bull Case

WeRide (WRD US), a provider of autonomous driving products and services, seeks to raise between US$200 to US$300 million through a Nasdaq IPO.
WeRide is the most commercially successful L4 autonomous driving company globally, measured by commercialization revenue in 2021, 2022 and 2023.
The bull case rests on a large TAM, strong product capabilities, near-term mass commercialization, articulation of a path to profitability, improving earnings quality and presence of blue-chip investors.

Flow Developments to Watch as the Release of the Value-Up Index Approaches

The plan is to select 20 large-cap companies from around 30 with value-up disclosures by late August, then gradually expand the index’s constituents.
Investors seeking both dividends and value-up benefits must buy stocks individually, as ETFs lack tax advantages, potentially triggering fund shifts from dividend ETFs to value-up stocks.
We can target stocks in dividend ETFs not making value-up disclosures, as they may face overhang risk during fund migration to the value-up index.

Korea Zinc: Impressive Capital Return Plans and a Big Price Gap Between Korea Zinc and Young Poong

On 7 August, Korea Zinc (010130 KS) announced several impressive capital return plan that should help to increase shareholder value.
The separation of Korea Zinc between the Choi and Jang families has been in progress in the past several years. The exact timing of when this occurs remains uncertain.
Our NAV Analysis of Young Poong is NAV per share of 470,065 won, representing a 52% upside from current levels.

Swire Properties (1972 HK): Buyback to Offset Passive Selling

Swire Properties (1972 HK) was trending lower on expectations of deletion from a global index in August. Short interest has jumped a lot over the last few months.
The announcement of the buyback last week took the stock higher. The increased real float from the index deletion will be offset by the buyback.
Swire Pacific (A) (19 HK)‘s ownership of Swire Properties (1972 HK) will increase from 82% to 83.5% following the buyback and cancellation of the shares. Privatisation at some point?

Taiwan Top 50 ETF Rebalance Preview: One Change Right at the Cusp

Using the last close, there could be one change for the Taiwan Top 50 ETF in September with Pharmaessentia Corp (6446 TT) replacing Nanya Technology (2408 TT).
There is one other constituent that is close to deletion zone while there are a couple of non-constituents that could move into inclusion zone over the next couple of weeks.
Short interest has been dropping in Pharmaessentia Corp (6446 TT) and increasing in Nanya Technology (2408 TT) over the last few weeks.

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Aug 11

Most Read: Swire Pacific (A), Trend Micro Inc, Hang Seng Index, Celltrion Pharm, Fila Holdings, Toyota Motor, GHCL Textiles, Kiswire Ltd, Fuji Soft Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Thoughts On Swire Properties (1972 HK)’s Buyback
Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?
EQD | The HSI Rebound Can Reach Higher Prices in August
Targeting Spreads by Leveraging the High Predictability of the Celltrion Merger
Trend Micro (4704 JP): Evaluating the Privatisation Rumours
Block Deal Sale of About 98 Billion Won Worth of Acushnet Holdings by Fila Holdings
Last Week in Event SPACE: Toyota, Swire, Fancl, Barito Complex, Descente
GHCL Textile Q1 FY25 Update
Korea Small Cap Gem #30: Kiswire
(Mostly) Asia-Pac M&A: Fuji Soft, C.I. TAKIRON, Pacific Smiles, GaPack, Asia Cement, Shinko Electric

Thoughts On Swire Properties (1972 HK)’s Buyback

Swire Pacific (A) (19 HK), 82%-held Swire Properties (1972 HK), and Cathay Pacific Airways (293 HK) all announced interim results this week.
Of interest was Swire Prop announcing a HK$1.5bn share buyback. Shares popped 12% on the news.
Swire Pac remains cheap on a look-through P/B of 0.34x. However, the implied stub and simple ratio (Pac/Props) have just rolled over from multi-year peaks.

Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?

A Reuters article overnight says Trend Micro might be up for sale. This caused the ADRs to jump 10% overnight. The remaining co-founders are 65 and 70 this year.
The stock has effectively gone sideways the last few years as Value Act has been activisting. Now one has to exercise one’s imagination to think about a possible sale price.
On a DCF basis, a PE fund couldn’t reasonably do this. Multiples are too high. That means a strategic buyer would be more likely. But Who? Why? And How much?

EQD | The HSI Rebound Can Reach Higher Prices in August

By Nico Rosti

In a previous insight we forecasted a rally for the Hang Seng Index in August. The picture has not changed, a positive close above 17344.60 is still possible.
Looking at our MRM SHORT WEEKLY model for the HSI we can see that it has not yet reached overbought levels, so it could rise further in the next weeks.
Conversely a SHORT trade will be possible from the levels we will indicate below.

Targeting Spreads by Leveraging the High Predictability of the Celltrion Merger

Local market views Celltrion’s shareholder survey as the start of the merger process, with a decision expected from the boards within two to three months if there’s no major opposition.
Under Korean law, if Celltrion Pharm’s market cap is under one-tenth of Celltrion’s, the merger can proceed as a small-scale merger, allowing Celltrion to avoid shareholder approval and appraisal rights.
We should leverage the merger’s high predictability to proactively target merger swap and appraisal rights spreads and build a strategy in advance.

Trend Micro (4704 JP): Evaluating the Privatisation Rumours

Trend Micro Inc (4704 JP) shares rose 14.8% on Friday after Reuters reported that it is exploring a sale after attracting buyout interest.
The interest is unsurprising due to the weak share price. Since ValueAct disclosed a stake on 8 August 2022, the shares are down 0.7% vs the Nikkei 225’s 23.6% increase.
The lack of a controlling shareholder and increased cybersecurity M&A activity support the buyout interest. A privatisation price is likely to be around JPY9,000. Valuation is undemanding at last close.

Block Deal Sale of About 98 Billion Won Worth of Acushnet Holdings by Fila Holdings

Fila Holdings announced that its subsidiary Magnus Holdings plans to sell a 1.8% stake in Acushnet Holdings in a block deal sale worth about 98 billion won.
Our NAV valuation of Fila Holdings suggests an implied value per share of 49,192 won, representing 18.2% upside from current levels. Fila Holdings’ 51.9% stake in Acushnet Holdings.
The block deal sale of Acushnet Holdings by Magnus Holdings is likely to have a positive impact on Fila Holdings as it could result in higher capital returns to shareholders.

Last Week in Event SPACE: Toyota, Swire, Fancl, Barito Complex, Descente

The trade in Toyota Motor (7203 JP)‘s Tender offer Buyback is to understand what YOU can do in your particular position.
Despite Swire Properties (1972 HK)‘s recent share buyback, Swire Pacific (A) (19 HK) is still preferable on a look-through P/B of 0.34x.
Kirin bumps the Offer for Fancl (4921 JP). Given market gyration, it may represent enough of a switching opportunity to let those who still object in principle to re-allocate elsewhere.

GHCL Textile Q1 FY25 Update

By Sudarshan Bhandari

Rs. 1,000 crores allocated for growth, with Rs. 350 crores deployed. 25,000 spindles added by May 2025.
Shift towards value-added products, including knitting, weaving, and dyed fabrics, with plans to double revenue in 3-5 years.
Despite expansion and potential opportunities, capacity constraints and global demand shifts temper expectations in the short term.

Korea Small Cap Gem #30: Kiswire

Kiswire Ltd (002240 KS) is the number one player for steel wire and rope products in Korea. More than 85% of its sales are generated overseas.
The company has a consistent record of generating positive net profit. It is trading at low valuations (P/B of 0.3x and EV/EBITDA of 4.5x).
Its average net profit from 2021 to 2023 are much higher than previous three years from 2018 to 2020, which is a testament of increasing demand for its products globally.

(Mostly) Asia-Pac M&A: Fuji Soft, C.I. TAKIRON, Pacific Smiles, GaPack, Asia Cement, Shinko Electric

I tally 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals were discussed this week on Smartkarma: KKR’s tilt for Fuji Soft (9749 JP); and Itochu’s Tenders Offers for Descente (8114 JP) and C.I. TAKIRON Corporation (4215 JP).
Key updates took place on Pacific Smiles (PSQ AU), Greatview Aseptic Packaging (468 HK), L’Occitane (973 HK), Fancl Corp (4921 JP), Shinko Electric Industries (6967 JP), and Isetan Singapore (ISET SP).

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Aug 10

Most Read: Alibaba Group Holding , Fuji Soft Inc, Kyocera Corp, Topsports International Holdings, Tata Motors Ltd, Swire Pacific (A), POSCO Holdings, Trend Micro Inc, Celltrion Pharm, Astera Labs and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
KKR ¥8,800 Takeover of Fuji Soft (9749) – Details and Arb Grid
StubWorld: Barito Renewables Rolling Over – More To Come. Also Kyocera/KDDI
China: Passive Selling Expected Later This Month
Tata Motors (TTMT IN): Index Impact of DVR Cancellation
Thoughts On Swire Properties (1972 HK)’s Buyback
Trading Opportunities from the Rise of Sector Pairs Trading Using SSFs & MM Unwinding at Expiry
Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?
Targeting Spreads by Leveraging the High Predictability of the Celltrion Merger
Astera Labs: Solid 2Q’FY24, ADTV Jumped As IPO Lock-Up Expired, PT Moves To $39.00

Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?

In its last update, Alibaba Group announced that the company was preparing for its primary listing in Hong Kong and the process was expected to complete by the end August.
The Board meets on 14 August to approve results for the three months ending June. Could there be an announcement on the dual primary listing too?
Mainland Chinese own between 3.5%-15.5% of companies that converted from Secondary to Dual-Primary in the last few years. Similar buying in Alibaba could take the stock higher from here.

KKR ¥8,800 Takeover of Fuji Soft (9749) – Details and Arb Grid

KKR has announced its previously leaked takeover of Fuji Soft Inc (9749 JP). Two activists with 30+% between them have agreed to tender at ¥8,800.
Given what the founder, crossholders, and other arbs own, this gets done easily. Congrats on the win to the activists.
We will see more activism and more pressure on under-earning companies to go private to clean themselves up outside the public eye. Big opportunities for years.

StubWorld: Barito Renewables Rolling Over – More To Come. Also Kyocera/KDDI

Barito Renewables Energy (BREN IJ) is down 19% in the past month. But still accounts for ~730% of parent Barito Pacific (BRPT IJ)‘s market cap. Still unsustainable.
Preceding my comments on the Barito complex AND the Kyocera Corp (6971 JP) / KDDI Corp (9433 JP) Holdco, are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation (sub/parent) >20%.

China: Passive Selling Expected Later This Month

The China equity markets have continued to trade lower with the CSI 300 Index outperforming other mainland indices as the National Team continues to pump money into ETFs tracking the index.
We currently estimate selling of around US$1.39bn across 74 stocks listed on the mainland and in Hong Kong. There could be fewer deletions depending on the review date chosen.
The potential deletes have dropped a lot since the start of the calendar year with big underperformance versus the HSCEI Index, CSI 300 Index and CSI Smallcap 500 Index.

Tata Motors (TTMT IN): Index Impact of DVR Cancellation

The Tata Motors Ltd (TTMT IN) / Tata Motors DVR (TTMT/A IN) scheme of arrangement has received shareholder approval and regulatory approvals and should be implemented in the short-term.
There will be small buying from global passive trackers while there will be much bigger buying from NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) trackers.
In total, we estimate passive trackers will need to buy 25.2m shares (US$308m; 1.9x ADV) of Tata Motors Ltd (TTMT IN) with buying coming in at different times.

Thoughts On Swire Properties (1972 HK)’s Buyback

Swire Pacific (A) (19 HK), 82%-held Swire Properties (1972 HK), and Cathay Pacific Airways (293 HK) all announced interim results this week.
Of interest was Swire Prop announcing a HK$1.5bn share buyback. Shares popped 12% on the news.
Swire Pac remains cheap on a look-through P/B of 0.34x. However, the implied stub and simple ratio (Pac/Props) have just rolled over from multi-year peaks.

Trading Opportunities from the Rise of Sector Pairs Trading Using SSFs & MM Unwinding at Expiry

Trading opportunities arise when overseas traders’ SSF positions face unwinding by local market makers, who enter SSF positions and take opposing spot positions, unwinding at expiry.
August-Expiry SSF data shows reverse flow impact by local market makers today, with varying degrees of impact per stock but an observable overall trend.
With ongoing market volatility in Korea, consider setups targeting price impacts from reverse flows of sector pairs trading on the next SSF expiration date.

Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?

A Reuters article overnight says Trend Micro might be up for sale. This caused the ADRs to jump 10% overnight. The remaining co-founders are 65 and 70 this year.
The stock has effectively gone sideways the last few years as Value Act has been activisting. Now one has to exercise one’s imagination to think about a possible sale price.
On a DCF basis, a PE fund couldn’t reasonably do this. Multiples are too high. That means a strategic buyer would be more likely. But Who? Why? And How much?

Targeting Spreads by Leveraging the High Predictability of the Celltrion Merger

Local market views Celltrion’s shareholder survey as the start of the merger process, with a decision expected from the boards within two to three months if there’s no major opposition.
Under Korean law, if Celltrion Pharm’s market cap is under one-tenth of Celltrion’s, the merger can proceed as a small-scale merger, allowing Celltrion to avoid shareholder approval and appraisal rights.
We should leverage the merger’s high predictability to proactively target merger swap and appraisal rights spreads and build a strategy in advance.

Astera Labs: Solid 2Q’FY24, ADTV Jumped As IPO Lock-Up Expired, PT Moves To $39.00

By Andrei Zakharov

Astera Labs reported solid 2Q’FY24. The company beat all key estimates, showed relatively strong demand and operating metrics.
With the stock trading at 19x EV/2024E Revenue and 13x EV/2025E Revenue I see shares as fairly-valued and expect the stock to trade in-line with peers. PT to $39.00.
All remaining Astera Labs shares held by stockholders became eligible for sale as IPO lock-up expired following public release of earnings for 2Q’FY24.

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Aug 09

Most Read: Alibaba Group Holding , Kyocera Corp, Topsports International Holdings, Fuji Soft Inc, Ola Electric, POSCO Holdings, Money Forward , Tata Motors Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
[JAPAN ACTIVISM] KKR Reportedly Plans Takeover of Fuji Soft (9749) – Relief from Activist Pressure
StubWorld: Barito Renewables Rolling Over – More To Come. Also Kyocera/KDDI
China: Passive Selling Expected Later This Month
KKR ¥8,800 Takeover of Fuji Soft (9749) – Details and Arb Grid
Ola Electric IPO Trading – Decent Anchor, Tepid Overall Demand
Trading Opportunities from the Rise of Sector Pairs Trading Using SSFs & MM Unwinding at Expiry
Fuji Soft (9749 JP): KKR Pre-Conditional Tender Offer at JPY8,800
Money Forward (3994): A Must-Buy Amid Yen Volatility
Tata Motors (TTMT IN): Index Impact of DVR Cancellation

Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?

In its last update, Alibaba Group announced that the company was preparing for its primary listing in Hong Kong and the process was expected to complete by the end August.
The Board meets on 14 August to approve results for the three months ending June. Could there be an announcement on the dual primary listing too?
Mainland Chinese own between 3.5%-15.5% of companies that converted from Secondary to Dual-Primary in the last few years. Similar buying in Alibaba could take the stock higher from here.

[JAPAN ACTIVISM] KKR Reportedly Plans Takeover of Fuji Soft (9749) – Relief from Activist Pressure

Last year into early 2024, Fuji Soft Inc (9749 JP) – partially at the prodding of 3D Investment Partners – took in 4 subs and conducted a strategic review.
In January, I explored the situation here suggesting the stock had run, FujiSoft needed to liquidate more assets, but a PE firm would look at a valuation of ¥600bn.
Last night, the Nikkei reported that US PE Firm KKR planned to take Fuji Soft private with a TOB valued at ¥600bn. Limit up will take us to ¥560bn+.

StubWorld: Barito Renewables Rolling Over – More To Come. Also Kyocera/KDDI

Barito Renewables Energy (BREN IJ) is down 19% in the past month. But still accounts for ~730% of parent Barito Pacific (BRPT IJ)‘s market cap. Still unsustainable.
Preceding my comments on the Barito complex AND the Kyocera Corp (6971 JP) / KDDI Corp (9433 JP) Holdco, are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation (sub/parent) >20%.

China: Passive Selling Expected Later This Month

The China equity markets have continued to trade lower with the CSI 300 Index outperforming other mainland indices as the National Team continues to pump money into ETFs tracking the index.
We currently estimate selling of around US$1.39bn across 74 stocks listed on the mainland and in Hong Kong. There could be fewer deletions depending on the review date chosen.
The potential deletes have dropped a lot since the start of the calendar year with big underperformance versus the HSCEI Index, CSI 300 Index and CSI Smallcap 500 Index.

KKR ¥8,800 Takeover of Fuji Soft (9749) – Details and Arb Grid

KKR has announced its previously leaked takeover of Fuji Soft Inc (9749 JP). Two activists with 30+% between them have agreed to tender at ¥8,800.
Given what the founder, crossholders, and other arbs own, this gets done easily. Congrats on the win to the activists.
We will see more activism and more pressure on under-earning companies to go private to clean themselves up outside the public eye. Big opportunities for years.

Ola Electric IPO Trading – Decent Anchor, Tepid Overall Demand

By Sumeet Singh

Ola Electric managed to raise around US$734m in its India IPO.
Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells
In our previous notes, we looked at the company’s past performance and valuations. In this note, we talk about the trading dynamics.

Trading Opportunities from the Rise of Sector Pairs Trading Using SSFs & MM Unwinding at Expiry

Trading opportunities arise when overseas traders’ SSF positions face unwinding by local market makers, who enter SSF positions and take opposing spot positions, unwinding at expiry.
August-Expiry SSF data shows reverse flow impact by local market makers today, with varying degrees of impact per stock but an observable overall trend.
With ongoing market volatility in Korea, consider setups targeting price impacts from reverse flows of sector pairs trading on the next SSF expiration date.

Fuji Soft (9749 JP): KKR Pre-Conditional Tender Offer at JPY8,800

Following media reports, Fuji Soft Inc (9749 JP) announced a pre-conditional tender offer from KKR at JPY8,800 per share, a 1.0% discount to the last close price of JPY8,890 (8 August).
The pre-condition is approvals under competition laws of Japan, Vietnam and possibly Belgium. The offer is anticipated to commence in mid-September.
The offer is a knockout bid and the culmination of an auction process. The board’s recommendation and the irrevocables from activist shareholders ensure this deal is done.

Money Forward (3994): A Must-Buy Amid Yen Volatility

By Mark Chadwick

Amidst the volatility in the Japanese yen, companies like Money Forward, with a strong domestic revenue base and minimal exposure to forex risk, present an attractive investment opportunity.
Despite broader market uncertainties, Money Forward continues to demonstrate impressive growth, with its corporate ARR surging by 38% YoY in the most recent quarter, signaling sustained momentum.
The recent agreement to divest 49% of its non-core B2C segment, Money Forward ME, underscores the significant undervaluation of its core operations.

Tata Motors (TTMT IN): Index Impact of DVR Cancellation

The Tata Motors Ltd (TTMT IN) / Tata Motors DVR (TTMT/A IN) scheme of arrangement has received shareholder approval and regulatory approvals and should be implemented in the short-term.
There will be small buying from global passive trackers while there will be much bigger buying from NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) trackers.
In total, we estimate passive trackers will need to buy 25.2m shares (US$308m; 1.9x ADV) of Tata Motors Ltd (TTMT IN) with buying coming in at different times.

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✓ Company Analytics and News
✓ Events & Webinars

Aug 08

Most Read: Toyota Motor, China Traditional Chinese Medicine, Nikkei 225, Softbank Group, Doosan Bobcat Inc, Alibaba Group Holding , Greatview Aseptic Packaging, Fuji Soft Inc, T Gaia Corp, Topsports International Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Thinking About The Toyota Tender Offer Buyback
China TCM (570.HK) Privatization Update – Things Are Still Manageable
How Has the Index Rebalance Strategy Performed During Market Turmoil?
JPX Nikkei 400 Index Rebalance: A Bunch of Chunky Adds & US$6bn Trade
Doosan Group Revises Merger Report and Increasing Probability of Merger Getting Cancelled
Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
GAPack (468 HK)’s Co-Founders (Almost) Walk The Walk
Fuji Soft (9749 JP): A Rumoured KKR-Sponsored MBO
JPX-Nikkei 400 Rebal Aug 2024 – 44 IN, 41 OUT, ¥500bn of Capping, Just Under ¥1trn to Trade
China: Passive Selling Expected Later This Month

Thinking About The Toyota Tender Offer Buyback

In May when shares were trading near ¥3,500-3,600, Toyota announced a ¥1trln buyback. When shares fell, they announced a Tender Offer Buyback at a large discount (¥2,781/share).
Subsequently, the shares fell very sharply on Thursday 1 August, then again Friday and yesterday. That put shares WELL below the Tender Offer Price. That creates possible opportunity.
This insight discusses modalities (talk to your advisor for specific advice/info) who might do what and why. It sets parameters. But I think Toyota is cheap here.

China TCM (570.HK) Privatization Update – Things Are Still Manageable

What disappoints investors is that privatization progress is slower-than-expected. Since approval is in “advanced stage”, August update is eye-catching. Investors may need more patience with this type of SOE deal.
The key to the success of this privatization lies in whether CNPGC is willing to abide by its commitments. If yes, CNPGC will take all measures to solve the problems.
According to our valuation calculation, even without this privatization, HK$3.5/share is fair for China TCM. Reasonable share price is above HK$5/share. Don’t forget, the privatization is still on the agenda.

How Has the Index Rebalance Strategy Performed During Market Turmoil?

The market turmoil over the last few trading sessions has not been kind to a simple index rebalance strategy of buying the forecast adds and selling the forecast deletes.
The overall returns and stock specific returns indicate that trades are more crowded in some indices as compared to others and traders should consider that when position sizing.
Anecdotally, periods of negative returns are followed by periods of strong returns for the strategy as weak hands are shaken out of their positions.

JPX Nikkei 400 Index Rebalance: A Bunch of Chunky Adds & US$6bn Trade

There are 44 adds/41 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
Based on the adds, deletes and capping changes, we estimate one way turnover of 7.9% and a round-trip trade of JPY 880bn (US$6bn).
The adds have outperformed the deletes over the last year though that has been faded over the last couple of months. Breaking with history, there could be outperformance near-term.

Doosan Group Revises Merger Report and Increasing Probability of Merger Getting Cancelled

On 6 August, the Doosan Group announced a revised merger report. Despite some changes in the merger report, there was no change the merger ratios.
Many minority shareholders of Doosan Enerbility and Doosan Bobcat are likely to oppose this merger. The net result is an increasing probability that this merger gets cancelled, in our view.
Doosan Enerbility has set aside about 600 billion won for exercise of appraisal rights and if it exceeds this amount, the merger may be cancelled.

Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?

In its last update, Alibaba Group announced that the company was preparing for its primary listing in Hong Kong and the process was expected to complete by the end August.
The Board meets on 14 August to approve results for the three months ending June. Could there be an announcement on the dual primary listing too?
Mainland Chinese own between 3.5%-15.5% of companies that converted from Secondary to Dual-Primary in the last few years. Similar buying in Alibaba could take the stock higher from here.

GAPack (468 HK)’s Co-Founders (Almost) Walk The Walk

To say Greatview Aseptic Packaging (468 HK)‘s management and Shandong Xinjufeng (301296 CH) (XJF) don’t get along is an understatement. GAPack has labelled XJF’s pre-conditional Offer hostile and unwelcome.
Last night (6th August), co-founders Jeff Bi and Gang Hong tabled a non-binding Offer. No price was mentioned. Collectively they hold 14.72% of shares out compared to XJF’s 26.8%.
A firm Offer (and price) would have been welcome, and this probably reflects on-going funding negotiations. But the announcement will give minorities pause if/when tendering into XJF’s Offer.

Fuji Soft (9749 JP): A Rumoured KKR-Sponsored MBO

Nikkei and Bloomberg report that Fuji Soft Inc (9749 JP) will be privatised through a KKR-sponsored MBO at a price just below JPY9,000, a 21.8% premium to the last close.
The rumoured privatisation proposal is the culmination of a sale process initiated by 3D Investment Partners, the largest shareholder, in September 2023.
The Board will meet tomorrow to discuss the proposal. The rumoured offer represents an all-time high and a knockout bid, suggesting a done deal if a binding proposal materialises.

JPX-Nikkei 400 Rebal Aug 2024 – 44 IN, 41 OUT, ¥500bn of Capping, Just Under ¥1trn to Trade

Janaghan Jeyakumar, CFA who does the predictions for this index got 10/10 of his high conviction names, 8/10 of his medium conviction, and 50% of low conviction ADDs.
This year, there are fewer caps but some big ones. Nearly ¥500bn of capping flow to sell.
I see just over $6.3bn in buying and selling to be done. A half dozen names with both high ADV impact to buy and decent size.

China: Passive Selling Expected Later This Month